Jacob Hacker and Teresa Ghilarducci: An Email Exchange on Retirement

June 3rd 2008

Today we are proud to bring you Teresa Ghilarducci (who just published When I’m Sixty-Four) in conversation with Jacob Hacker (author of The Great Risk Shift). These two experts will be debating how to ensure retirement for future generations. This is the first part of the series which will we be publishing all week, so be sure to come back and check our exchange.

You have written a powerful indictment of our rickety framework of retirement security, one that resonates very much with my own thinking on the topic. And you have done a masterful job puncturing the view that further encouragement of 401(k)s or partial privatization of Social Security is our salvation. As you show, these poison pills will actually increase the risk of inadequate income in retirement for most Americans while showering even more government largesse on well-off folks who do not have all that much to worry about.

And yet, I find myself coming up short -no pun intended- on those who would advocate a later retirement age. I am with you for most of the trip. Telling people that they need to tough it up and stay in the workforce for much longer than their parents did illustrates precisely the excessive emphasis on personal responsibility in economic policy debates that I criticized in The Great Risk Shift.

Many people don’t retire voluntarily; many have labored more than long enough, in jobs that are demanding and tiring; and many, sadly, won’t actually live that long after they leave work. You also make the important point that one reason we may be living longer -and, as you know, there are stark differences both in life expectancy and how much it has grown across income classes– is precisely because we have more time in retirement.

Still, we are living longer. And many of us are staying in school longer. And many of us are doing jobs, such as mine, where most of our time is spent sitting at desks, rather than lifting girders. I agree that working longer cannot be a national policy solution, but I wonder if we should be so resistant to the idea that a good share of Americans — and, perhaps even more so, Europeans — should be working later in life than they do now. I like the general idea, for example, of basing retirement age on the number of years in the workforce, so that those who get advanced degrees end up retiring later than those whose formal education ends much earlier. I see no reason either why we should encourage early retirement — by which I mean retirement before age 65 — except in cases where it is truly necessary or unavoidable. And I think we should be improving the opportunities for older workers to take fair part-time jobs, in part because I think that all Americans should have the opportunity to take part-time jobs that pay well and offer benefits when they need to do so to balance work and family.

It seems to me that the message you want to convey is that people need security as well as choice. They need guaranteed retirement benefits that are there when they need them, even if they need them at 62. But they should also have the choice to work longer, with benefits that do not penalize them if they stay in the workforce until 69, or 79. What do you think? And what should those benefits — and other supportive policies — look like?

Best,

Jacob

Dear Jacob

Thanks for your comments, we both challenge the growing insecurity of workers’ financial futures.

In writing the book I decided to first think what American retirement policy did right, to see where we went wrong. Through a patchwork of private/public programs – employer pensions, Social Security, disability provisions – we successfully extended to all workers what was once only available to the rich – a chance to retire at the end of our working lives. In one of my favorite chapters, I show that we have a very flexible retirement system so that everyone gets a crack at free time before they die. The coal miner dies sooner but he can retire earlier; the coal mine owner lives much longer, but she can work into her seventies. We, Americans have laws against age discrimination; we proudly stand apart from Europe and Japan, who make people leave their jobs JUST because of their age.

I want to preserve that equity and flexibility, Jacob, the ability of all older people – regardless of social economic class — to have free time at their end of their lives, to construct a meaningful narrative of themselves and their human relationships, whether it be by working or not.

I wrote this book to describe the attack on retirement, the creation of an ethic of work to supposedly stave off a fear of aging, and who wins and loses under the new pro-work, anti-pension ethic.

You are right, many come up short when they hear I am against policies to extend the retirement age and policies that push a pro-work agenda. Indeed, reporters, congressional members, educated professionals like us, really hate it when I say I am defending retirement or, worse, retirement leisure. I see them shuddering and shaking their heads no.

They think I am talking to them, telling them I want to declare them retired and thrown away. Though, when I talk to working people and people who fear from their pensions they hear something else. They hear me defend age discrimination laws. They hear me defend the unappreciated abilities and great desire of older people to be trained on the job.

They hear me defend the real choice to work in old age.

I propose that all workers save 5% of their income in guaranteed retirement accounts (GRAs) to supplement their Social Security benefits with a $600 contribution from the federal government. The worker takes responsibility to ensure they have basic income — 70% of pre-retirement earnings — after age 65. Under my plan, only a full 40 years of work or more gets you the basic pension. People should work as long as they want to. The thrust of my proposal is that only when we secure basic income in old age, will employers have to entice older people into the labor pool. Without basic pensions older people are pushed and never have time to rest and reflect. That is simply not an option in a civilized society.

Thanks for your comments Jacob!

Teresa

P.S. Your early work on the history of the welfare state in the United States was helpful in my approach to the looming retirement crises. I never had your article with Beland far from my desk.

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[…] debating how to ensure retirement for future generations. This is the final part the exchange. Read part one and part two. Teresa Ghilarducci taught economics for twenty-five years at the University of Notre […]